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How to Encourage Loyalty From Your Customers

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It’s a widely accepted fact in business that it’s cheaper to retain your existing customers than to find new ones. Research carried out by Frederick Reichheld found that by retaining 5% more of existing clients you can increase a company’s profits by somewhere between 25% and 95%.

Even at the worst-case level of 25%, this is a significant return from a lot less work. Assuming it would take 25% more new customers to achieve the same result, customer retention is significantly cheaper than acquisition. 

It’s therefore important to understand strategies that’ll increase the loyalty of our customers so that they will continue to purchase from our business. There are plenty of techniques that can be used, and their relevance will sometimes depend on the nature of what you sell.

Offer a Good Service

The first way to encourage customer loyalty is almost universal. Simply providing a good service to your customers is the best way to keep them coming back for more. Ensuring that delivery deadlines are met, that the products meet (or exceed) expectations, and that customer service is at a high level will go a long way in achieving this.

For internet service providers, good service could simply mean maintaining a strong and stable connection, while for a luxury car manufacturer it might be offering personalised service and a product that has a premium feel. 

A good service is relative to the industry, customer, and pricing. For example, European budget airline Ryanair offers low fares to its customers but regularly receives many complaints from customers due to its strict hand luggage rules. Customers must also print their own boarding passes and pay for anything they want onboard.

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In comparison, other airlines offer more generous allowances and are less strict in their enforcement of rules. Customers may also receive complimentary food and drink on board. In turn, their prices are generally higher than Ryanair’s.

It could still be argued that both models are delivering good service since customers are getting what they want. With Ryanair, they get cheap flights with no frills and will put up with that to save money. While with other carriers they get a more premium service but have to pay extra. 

Therefore, “good” service is more about meeting expectations rather than being the best.

Offer a Good Service

 Loyalty and Rewards Schemes

Loyalty schemes come in many shapes and sizes, but the majority of them have the same basic elements. They reward customers with points whenever they spend money, either tracking it through an online account or by using a physical loyalty card. 

These points can then usually be converted into vouchers or other rewards. In the UK, the Tesco Clubcard was an early example of a physical loyalty card that’s used to reward customers with vouchers. They receive 1 point for every £1 they spend in-store, which equates to 1% back when the points are converted to vouchers.

PokerStars provides another good example of a loyalty scheme. Since its operations are online, its loyalty scheme which is known as Stars Rewards doesn’t use a physical loyalty card. Instead, customers receive StairsCoin as they spend money. They can then redeem these for physical and digital goods in the Rewards Store.

Use Data

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Using data to better understand what customers want is a great way to increase loyalty. Boots, another UK retailer with a loyalty card, uses its scheme to build up a profile of what the customer likes to buy and sends them regular personalised vouchers and coupons to encourage them to spend more in store. 

Amazon does the same through its website. It analyses the buying habits of its millions of customers and makes recommendations to each person that is individual to them, based on what other customers with similar buying preferences have also bought. 

By using data, even large businesses are able to provide elements of “personal service” that was once only available from small independent firms. They don’t need to be burdensome to implement either, while the Boots Advantage card cost millions to implement, plugins, and add-ons are available for many e-commerce platforms that allow recommended product features to be turned on in minutes.